Read our guide to find out more about the types of holiday home mortgages for your situation
You can use a holiday let mortgage to buy a holiday home that you plan to let out to tourists and visitors on a short-term basis.
This is different to having a mortgage for a second home which you plan to use yourself and not rent out.
With fluctuations in seasonal rental income, the criteria for taking out a holiday let mortgage can be stricter than a buy-to-let mortgage. But furnished holiday lets can allow you to claim tax relief on your mortgage payments.
Buying a property to rent out as a holiday let can provide you with an additional income as well as a welcome place to escape to. So, if you’re thinking of buying a holiday let, what are the pros and cons you should consider?
As with any mortgage, there are some criteria that you’ll need to meet before your holiday let mortgage is approved.
Depending on the lender, for most holiday let mortgages you’ll need:
Because the rent you’ll receive will go up and down depending on the season and number of bookings, mortgage lenders see this type of property as having a greater risk so interest rates will be higher compared to residential mortgages.
Although the number of holiday let mortgages available can be limited, the increasing popularity of staycations means the range of lending options is growing for this market.
The main difference between buying these two types of properties is that a buy-to-let will be used by long-term tenants, while a holiday let is usually rented for just a few days or weeks at a time and the rent is affected by holiday seasons. The type of mortgage you’ll need is also slightly different:
Both types of mortgage are usually taken out on an interest-only basis.
The deposit you’ll need for a holiday let is likely to be higher than other types of mortgage.
The amount will depend on your individual circumstances, the lender, and what percentage of the property’s value (LTV) you’ll be borrowing.
A larger deposit will help you to access better mortgage deals.
To help you work out how much you can borrow, what your mortgage payments might be and how much deposit you’ll need, try our mortgage affordability calculator.
For a holiday let mortgage application there are a few details you’ll need, like:
This does really depend on which mortgage you have.
Some lenders don’t allow it, but there are now an increasing number of holiday let mortgages that are suitable for airbnb hosting.
You should check the details on your mortgage documents or speak to your provider to make sure.
Some mortgage lenders will limit the number of holiday let properties you can have, with some saying you can only have one and others being more flexible.
Yes, you can use your furnished holiday home yourself and still take advantage of the tax relief available, as long as the property is available to rent as holiday accommodation for at least 210 days of the year and is actually let for 105 of those days.
Some of the major high street banks in the UK do offer mortgages overseas in countries where they have offices.
If you want to arrange a mortgage in a non-UK country where the property is based, you’ll need to use a specialist broker. Mortgage arrangements vary between countries but you may find you’ll need a higher deposit percentage than for a UK property.
You should be aware that if you’re borrowing in a foreign currency, fluctuations in the exchange rate will affect your repayments.
If you have enough funds, one option is to make a cash purchase. This means you won’t need to pay mortgage interest or fees and all the taxed rental income will be yours.
Remortgaging your home could release money to either increase the amount of deposit you can put down, or you may have enough equity in your home to buy your holiday-let without a mortgage.
Be aware that if you’re able to pay in full this way, you won’t be able to claim tax relief on the mortgage interest on your own home when calculating profits from your holiday let.
Alternatively, if you have most of the money you need to buy a holiday let you could take out a personal loan, typically available up to the value of £25,000, to pay for the rest.